Malaysia - Market Strategy

Malaysia - Market Strategy

Postby winston » Sat Apr 12, 2014 3:23 am

RHB Research retains Overweight on construction sector

KUALA LUMPUR: RHB Research remains Overweight on Malaysia’s construction sector, underpinned by the strong earnings visibility, mainly due to the RM73bil Klang Valley Mass Rapid Transit (KVMRT) project that will keep players busy until 2021.

In its research note issued on Wednesday, it also saw opportunities for players in the public housing segment as well as in Sabah and Sarawak Corridor of Renewable Energy (SCORE).

“Our Top Picks for the sector are Gamuda, Protasco and Hock Seng Lee,” it said.

RHB Research said investors should stay invested in the construction sector due to the record or close-to-record outstanding orderbook for most players at present.

It also expected more new jobs in the pipeline including the Klang Valley MRT Line 2 project, Kwasa Damansara, the Refinery & Petrochemical and Integrated Development (RAPID) project in Pengerang, several new toll roads, as well as Track 3A and Track 3B power plant projects.

The research house said the KVMRT project was the main pillar of support to the current upcycle due to the massive contract value of RM73bil.

It pointed out the KVMRT would have a positive impact along the entire value chain of the sector, creating orders for management, general and specialist contractors, as well as suppliers of various building materials.

Another factor was the KVMRT’s long construction period of about 10 years from 2012 to 2021.

“We believe Gamuda (Buy, Fair value: RM5.45) is the biggest beneficiary of the project.

As for Protasco, it would be the key player in public housing due to a RM1bil allocation for the Housing Facilitation Fund under the 2014 Budget.

RHB Research said Protasco (Buy, FV: RM2.18) has thus far secured the highest number of public housing contracts.

As for Hock Seng Lee (Buy, FV: RM2.06), it is the best construction proxy to Sabah and Sarawak and SCORE.

It expected infrastructure projects to be rolled out under SCORE (roads, water supply and port); urbanisation (flood mitigation, waste management and traffic diversion); and rural development (roads, water supply and housing).

http://www.thestar.com.my/Business/Inve ... on-sector/
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Re: Malaysia - Market Direction & Strategy

Postby winston » Wed Jun 04, 2014 8:21 am

Corporate Malaysia’s Q1 earnings disappointing

PETALING JAYA: Corporate Malaysia's first quarter results season was another disappointment despite a 21.4% jump in profits, earnings excluding exceptional gains fell below consensus.

The top 30 companies on Bursa Malaysia reported a 21.4% jump in net profit of RM16.96 billion in the three months ended March 31, 2014, boosted by large one-off gains at IOI Corporation Bhd and MISC Bhd that lifted earnings from a year ago.

However, stripping out the exceptional items, unmasked a more modest gain of 5.3% year-on-year and a 0.4% decline from the fourth quarter of 2013.

"The aggregate adjusted earnings figure came in 5.3% below our Q1'CY14 estimate of RM15.97 billion and therefore lagged our expected on-year quarterly earnings growth of 13.9%," MIDF Research's head of equity Syed Mohammed Kifni said in a report yesterday.

Among the notable FBM KLCI constituents who failed to meet earnings expectations were Sime Darby Bhd, KL Kepong Bhd, Felda Global Ventures Bhd and Telekom Malaysia Bhd.

MIDF Research has adjusted the aggregate earnings estimates of stocks under its coverage up by 0.3% to RM70.4 billion in 2014 and down 1.9% to RM76.73 billion in 2015.

"Earnings disappointment coupled with the prevailing above mean market valuation as well as 'expectation' of a hike in the OPR later this year may put a cap to the market near-term upside," Syed said.

He maintained his full-year earnings projection for the FBM KL Composite Index constituents of 1,900 points with the upper and lower bounds at 1,980 points and 1,840 points respectively.

Hong Leong Investment Bank (HLIB) also maintained its FBM KLCI year-end target of 1,910 or 16 times of 2015 earnings.

"Given the lack of fresh catalyst(s), commencement of the month-long World Cup on 12 June (whereby market traditionally drifts lower with subdued activities), heightened geopolitical risks and continued disappointing reporting season, we continue to expect the market to remain lackluster with some downside risk (albeit limited)," its analyst Low Yee Huap said.

RHB Research downgraded earnings estimates of stocks under its radar and now projects earnings growth of 3.7% and 8.7% for 2014 and 2015 respectively.
"The pedestrian earnings growth and lofty valuations will limit market upside," said its analyst Alexander Chia who maintained a target of 1,940 points for the FBM KLCI for 2014.

He said after last December's aggressive window dressing activities, it was perhaps unsurprising to find the FBM KLCI the worst-performing market in Asean.
Despite a 6.2% growth in Q1 gross domestic product (GDP), he said, corporate earnings continued to grow at a pedestrian pace given rising front-loaded costs from new investments that have squeezed margins.

"In the absence of strong earnings growth, market valuations remain at elevated levels that we expected will cap upside," he said.

Concurrently, Chia expects the downside to the market will be limited, given the high level of liquidity in the market and corrections will likely be shallow.

RHB Research continues to like plantations, banks, construction, property and Sarawak Corridor of Renewable Energy (SCORE) plays with Malayan Banking Bhd (Maybank), Genting Plantations Bhd, Cahya Mata Sarawak Bhd and Press Metal Bhd as its top picks.

http://www.thesundaily.my/news/1067726
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Re: Malaysia - Market Direction & Strategy

Postby winston » Sun Nov 23, 2014 5:36 pm

Outlook:

Bursa Malaysia put up a lifeless performance the past week, probably due to underlying worries about a slump in commodity prices, exacerbated by fresh signs of weakness in China and Europe.

Based on the daily chart, the poor show of the market has resulted in the 14-day simple moving average (SMA) falling below the 21-day SMA once again.

With the 100-day SMA appearing very likely to go under the 200-day SMA to trigger another “death cross” over the next several days, investors are advised to remain cautious in the near term.

Technically, most of the indicators on our screen are frail, suggesting the local bourse would be under pressure in the intermediate term.

A crack of the 1,800-point psychological floor is likely to lead to a re-test of the recent lows of 1,766.22, of which a clear breakdown would see the FBM KLCI racing downwards.

The immediate upside is capped at the 1,850 points or the 1,860 points heavy barrier, at least for now.

Source: The Star

http://www.thestar.com.my/Business/Busi ... ?style=biz
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Re: Malaysia - Market Direction & Strategy

Postby winston » Fri Nov 28, 2014 11:22 am

SC Shariah list

According to Maybank Investment Bank Research 40 stocks were added and 30 removed. There were 673 Shariah stocks in total.

Prominent removals were CCM, Shell Refining, SapuraKencana, SHL, Perdana Petroleum and Puncak Niaga.

Prominent additions were Amway, Boustead Plantations, Hap Seng Consolidated, Icon Offshore, Padini, Kian Joo, Media Chinese.

The surprise was that IOI Corp was still Shariah compliant while Media Chinese is now Shariah compliant.

http://www.thestar.com.my/Business/Busi ... ?style=biz
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Re: Malaysia - Market Direction & Strategy

Postby winston » Thu Dec 04, 2014 4:02 pm

Mark Mobius sees upside for Malaysia’s utilities, consumer oriented companies By: JOSEPH CHIN

KUALA LUMPUR: Prominent fund manager Mark Mobius expects utilities to be one one area which could potentially benefit as subsidies are lifted and profitability may improve as a result.

According to his blog, he also likes consumer-oriented companies that can stand to potentially benefit as Malaysia works toward its long-term goal of becoming a high-income country, and “as more of its people potentially rise into the ranks of the middle class”.

In his blog on the topic of “Investing in Malaysia: The importance of stock picking”, he explained that as investors in Malaysia, it was important to be selective, particularly given that valuations have been higher than in some other Asian markets, while at the same time, performance has generally been somewhat disappointing.

“One area of focus is smaller companies that we think have potential for growth, but that have been generally overlooked by other investors,” he said.

Mobius said his team recently visited a Malaysian oil services company with operations not only in Malaysia but also across Southeast Asia, Brazil, Australia and Africa.

“Lower oil prices are likely to have a significant impact on its operations, and it looks to us like there will need to be some belt-tightening. Nevertheless, some fields in Malaysia are very low cost, at well below US$50 per barrel. Therefore, lower oil prices don’t necessarily mean companies in the sector will be unprofitable,” he added.

Mobius also said his team visited an auto distributor which was looking forward to expanding from the distribution of automobiles to the assembly of imported Japanese autos.

“Management there is optimistic that the auto market in Malaysia was expanding and consumers were seeking more up-market brands and models,” he said.

On palm oil, one of Malaysia’s top exports, Mobius said the visit to a palm oil plantation firm revealed that palm oil prices were temporarily under pressure, but from a long-term view, the firm expected demand for palm oil globally to increase.

He said the company was, therefore, replacing older palm oil trees with new, higher-producing palm oil trees as well as expanding its plantation acreage.

Mobius said Malaysia was working toward its long-term goal of becoming a high-income country, and as more of its people potentially rise into the ranks of the middle class.

He pointed out that there will be a few bumps that can impact this vision, and some policies will not be particularly popular with the people—including not only removal of subsidies but also the implementation of the GST, planned for April 2015, which replaces Malaysia’s 10% sales tax and 6% service tax with a flat 6% tax across nearly all goods and services at each stage of the supply chain.

“As investors, we have to maintain a long-term view and focus on companies we feel can survive and prosper amid changing conditions, and that fill an interesting niche. We also look for companies that have the potential to serve consumers not only in Malaysia but throughout the region, and even globally.

“Currently, we see Malaysia undergoing a period of transition, as old policies must evolve to meet future goals. I would describe our view of Malaysia today as cautiously optimistic—we are certainly hoping Malaysia succeeds in reaching its ambitious goals, and we plan to be there along the way,” he added.

Source: The Star
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Re: Malaysia - Market Direction & Strategy

Postby winston » Tue Dec 16, 2014 12:45 pm

STRATEGY – MALAYSIA
2015 Outlook & Strategy


The Malaysian equity market appears destined to follow 2H14’s downtrodden path as various economic challenges (most notably the plunge in crude oil prices) render the FBMKLCI a regionally less attractive bourse.

While risk aversion will still prevail, downside is limited as there is sufficient domestic liquidity to absorb foreign equity and bond portfolio outflows.

A firmer 2H15 is predicted. Meanwhile, stay on a defensive course with the exception of some trading excursions.

http://research.uobkayhian.com/content_ ... fa0d56527d

Source: UOBKH
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Re: Malaysia - Market Direction & Strategy

Postby winston » Fri Dec 19, 2014 6:45 am

Malaysia $31 Billion Pension Fund Bets on an End to the Selloff

http://www.bloomberg.com/news/2014-12-1 ... lloff.html
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Re: Malaysia - Market Direction & Strategy

Postby behappyalways » Sat Dec 20, 2014 4:26 pm

Tan has been bearish on markets since the end of last year and warns that there is more downside to come, stemming mainly from the rich valuations in the local market, the New York Stock Exchange and NASDAQ, to name a few.

“Reinforcing our worries is a US monetary policy that is highly opaque and confusing and where the Federal Reserve keeps shifting its monetary goal posts.”

Fund managers rethink strategies
http://www.thestar.com.my/Business/Busi ... ?style=biz
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Re: Malaysia - Market Direction & Strategy

Postby behappyalways » Thu Mar 19, 2015 9:57 am

Petroliam Nasional Bhd., known as Petronas, reported a fourth-quarter loss of 9.9 billion ringgit ($2.7 billion) on Feb. 27 and said it will cut capital investments and operating expenditure.

The company, which manages the country’s energy reserves, will delay projects including a gas-processing plant and stop ventures with other energy firms to develop smaller oil fields.


No End in Sight for Malaysia’s Energy Stock Rout on Profit Slump
http://www.bloomberg.com/news/articles/ ... ofit-slump
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Re: Malaysia - Market Direction & Strategy

Postby winston » Mon Mar 30, 2015 6:32 am

The cash-rich companies of Bursa

BY: YVONNE TAN

CASH-RICH companies are always something worth keeping an eye on for investors seeking value.

To cater to their needs, there are a handful of companies on Bursa Malaysia which are in enviable net cash positions and should be able to withstand any shocks to the market.

Topping this coveted list is Genting group which, after stripping out all of its borrowings and debts, has a whopping RM13bil in its coffers.

Its RM13bil cash position is certainly admirable but the revelation is also somewhat surprising, given that the group that is involved in leisure, hospitality, plantation and property all over the world, has been in expansion mode.

Controlled by billionaire Tan Sri Lim Kok Thay, the second son of the late tycoon Tan Lim Goh Tong, the Genting group recently snapped up business opportunities in New York and Jeju island in South Korea.

In New York, it managed, via a private vehicle of Kok Thay’s to outbid its opponents, winning a bid from the New York Gaming Facility Location Board to build the Montreign Resort Casino in the Catskills and Hudson region of New York .

On the holiday island of Jeju, Genting via its Singapore unit stamped its Resorts World brand name recently with its February ground-breaking ceremony for Resorts World Jeju - the US$1.8bil integrated resort it is building together with Chinese developer Landing International Development.

As a stock however, Genting’s share price performance is hardly reflective of its cash-rich status.

Year-to-date, the stock is down 0.3% to RM8.83 ,compared to the broader market which has gained 3.5%.

Genting’s dividend yield - a measure of how much a company pays out to its shareholders in relation to its share price, is also relatively low at less than 1%, based on what they paid out in the last financial year and its current share price of RM8.83.

“High cash levels but low dividend yields - this is the typical complaint about them which explains the lower valuations accorded to the Genting stock,” says Fortress Capital fund manager Thomas Yong.

Seven out of 22 analysts surveyed by Bloomberg have a “buy” call on the stock, with an 12-month target price of RM9.88.

Not borrowing enough

Generally, Yong, who helps manage more than RM900mil in funds, prefers companies with lower cash levels and a healthy gearing level, provided the borrowings are used for good acquisitions resulting in better return on equity and assets.

“Most of the time, companies with high levels of cash and zero borrowings mean that they are not borrowing enough to maximise returns on shareholders’ funds.”

He doesn’t deny that the ones with healthy coffers are defensive in nature, especially in times of crisis.

“But how often does that (crisis) happen, once every 10 years?”

Coming in at second place on the net-cash list is integrated chemicals producer Petronas Chemicals Group Bhd with a total of RM9.8bil. According to industry sources, the group which was listed in 2010, has been conserving its cash as it has the intention to buy over some of the assets that will be built by its parent company Petroliam Nasional Bhd (Petronas) at the Pengerang Integrated Complex in Johor. The company has a dividend yield of about 3%.

Notably, another subsidiary of Petronas, Petronas Dagangan Bhd, which is its marketing arm, is also one of the companies at the top of the list with total net cash of RM1.3bil.

Meanwhile, another family-owned conglomerate, Oriental Holdings Bhd, also makes the cut with its cash amounting to RM2.26bil, a healthy amount which has been at this level - for at least a few years.

The group founded by the late Tan Sri Loh Boon Siew aka Mr Honda has interests across sectors coveringautomotive, palm oil, real estate, hospitality, plastics manufacturing, building materials and healthcare.

It is famed for being the distributor of Honda vehicles in Malaysia and Singapore.

The main grouse of analysts that cover Oriental, is not surprisingly the fact that it has not used its cash to generate exciting enough returns for shareholders.

Oriental recently saw third-generation descendant, Datuk Loh Kian Chong, the 38-year-old grandson of Boon Siew, take over the role of chairman and executive director of the group.

Although Oriental has been paying out dividends to its shareholders annually, the gross payout rates have been on a declining trend from 10% in 2009 to 7% in 2013.

Surprisingly, plantation group Felda Global Ventures Holdings Bhd (FGV) which has been on a trail of acquisitions since its IPO in 2012, snapping up plantations from Sabah to Indonesia, is also among the companies with the most cash on Bursa Malaysia.

The government-linked company’s acquisitions have been criticised and labelled as pricey and there is concern now whether or not it will be able to extract the needed synergy from its previous acquisitions to improve its overall outlook amid declining crude palm oil prices.

Notably, FGV is left with its cash hoard of RM1.51bil after its initial public offering exercise which managed to raise proceeds of RM4.5bil.

Also on the list, low-profile Keck Seng (M) Bhd with its interest in palm oil cultivation, property and resort segments and primarily retail group Parkson Holdings Bhd which trail closely behind FGV, sitting on slightly over RM1bil each.

Cash is king?

Fund managers basically agree that a balance between borrowings and cash is the best when it comes to choosing investments.

While some tend to take more risk by focusing on companies which borrow more than they have in cash, others prefer companies with net-cash positions.

“If they have free cash flow it’s nice to receive dividends but I would say in Malaysia we would prefer our companies to have some cash to weather an unexpected storm,” Aberdeen Asset Management managing director Gerald Ambrose says.

Danny Wong, fund manager at Areca Capital, takes a bit more risk.

“As we switch companies based on our outlook on the market, we don’t really hold cash companies in good times,” Wong says.

“Cash is king only when one knows how to use it, letting it be idle is useless.”

Ambrose doesn’t like share buy-backs, which cash-rich companies sometimes undertake to reduce the supply of their shares in the market so that the value of their stock can increase.

“It leads to a misalignment of incentives, especially when you have a greedy management and it does not really make sense to be buying back your own shares especially at crazy high valuations. That’s what they’re doing in the US.”

Share buy-backs are sometimes also done when there is a threat of a company being taken over. In this case, the management will mop up their own shares from the market to avoid that from occurring.

Source: The Star
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